Industrials

General Electric Woes Anchor Stock as Dow's Worst for the Year

Paul Ausick

Published: January 27, 2018 9:10 am

Last Updated: January 12, 2020 4:02 am

General Electric Co. (NYSE: GE) reported fourth-quarter and full-year earnings last week, and while there were no big negative surprises, there wasn’t any good news either. In the week just passed, GE stock has held on to its ranking as the worst performer among the Dow Jones Industrial Average equities, a place it held for more than half of 2017.

GE’s shares lost 0.8% last week, and shares are down about 7.6% since the beginning of the year. The only other Dow 30 stock showing a downward trend this year is Procter & Gamble Co. (NYSE: PG), which is 4.5% lower for the year to date.

The Dow posted an all-time high of 26,616.71 on Friday, and that’s where the index closed the week, up about 224 points (about 0.85%) for the day. The index gained more than 2% last week.

GE shares climbed early last week as investors appeared to be buying the dip. The price spiked to more than $17 a share early Wednesday, the day the company reported earnings, but the enthusiasm didn’t last. Shares closed down about 3.2% for the day.

Another development that didn’t help was an announcement from GE that the U.S. Securities and Exchange Commission (SEC) has opened an investigation into GE’s accounting practices. The SEC is looking at how GE recognized revenues from long-term service contracts for power-plant equipment and jet engines.

The company’s accounting and even its quarterly and annual reports have never been models of clarity. GE’s chief financial officer has tried to squash speculation about further charges, like the $6.2 billion write-down the company took a couple of weeks ago related to the run-off of GE Capital’s reinsurance business.

So far new CEO John Flannery’s major contribution to the company’s fortunes has been to promise that GE will be around for decades to come but it won’t look like yesterday’s GE. How attractive a smaller GE will be to investors is the $64,000 question.

GE shares dropped to a new 52-week low of $15.80 on Monday but recovered a little to close the week at $16.13. Shares lost $0.13 (less than 0.1%) for the week. The stock’s 52-week high is $30.59, and the 12-month consensus price target is $20.28, down $1.43 week over week. The low target is $15 and the high target is $36.